Alcan sells Utkal stake to Hindalco

Canadian metal giant Alcan today announced an agreement to sell its 45 per cent stake in Utkal Alumina to the Aditya Birla group's Hindalco Industries for an undisclosed sum.

The Utkal joint venture was established in 1992 between the Birlas and Alcan, with the Birlas owning the remaining 55 per cent of the equity. The venture involved the development of a new bauxite mine and alumina refinery in Orissa.

Alcan, the target of a friendly $38 billion takeover offer from Rio Tinto, said in April this year that it planned to sell the stake in Utkal Alumina.

In a statement issued from Montreal, Alcan said today that it expected to complete the transaction during the third quarter of 2007.

"Alcan is pleased to have reached this agreement with Hindalco regarding the sale of its participating interest in Utkal," said Jacynthe Cote, president and CEO of Alcan Bauxite and Alumina.

"The company values its long-standing partnership with Hindalco, with whom it remains associated as technology supplier to the Utkal project and other Hindalco projects," Cote continued.

"Alcan will continue to focus on growing and executing its pipeline of projects in bauxite-rich regions, while leveraging its world-leading alumina refining technology," she concluded.

In its statement, Hindalco said the conclusion of the transaction marked the complete exit of Alcan from the Utkal project. "Alcan will have no surviving rights or obligations as Hindalco becomes the 100 per cent owner of the Utkal project," it said. The Indian company expects the deal to be closed in the next 30 days.

Hindalco and Alcan will continue to have a cordial business association, given that Alcan has ongoing contracts with Novelis. It is also the technology provider to the Utkal alumina project and some other alumina projects of Hindalco.

Alcan had earlier in April suggested that the Rs 4,500 crore project was too risky due to its lack of control over it.

"We have carefully weighed the opportunity and risk presented by the Utkal project and, given the constraints within the governance structure that limit Alcan's ability to participate in key decisions, believe that we have acted in the best interests of all our stakeholders," Cote had said in April.

The project has been marred by controversy, with local residents opposing its construction on the plea that it will displace three villages and at least 200 families. Local critics have estimated that as many as 22,000 people could be affected. In December 2000, there was a clash between villagers and police in Maikanch over land acquisition. Three tribals were killed in the police firing that followed. Utkal was initially established as a joint venture between Hindalco, Alcan and Hydro Norsk. The shareholding was shared between Indal, now a part of Hindalco at 20 per cent; Alcan at 35 per cent and Norsk Hydro with 45 per cent. Norsk Hydro later sold its stake to the other two partners.

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